Rachel Reeves has sought to blame deteriorating public finances on a global rise in borrowing costs as she prepares to unveil a spring statement widely expected to include spending cuts.
Speaking to broadcasters ahead of her statement on Wednesday, the Chancellor said Britain had not been “immune” from global increases in the cost of government debt.
But she insisted she would meet her “non-negotiable” fiscal rules despite expectations that official forecasts also published on Wednesday would show her “headroom” against those targets had vanished.
She said: “We can see that the world is changing, and part of that change is increases globally in the cost of government borrowing – and Britain has not been immune from those challenges.
“The OBR (Office for Budget Responsibility) will set out their verdicts on growth and on the public finances today, but we will continue to meet the fiscal rules I set out in the budget last year.
“Economic stability is non-negotiable, I will never play fast and loose with the public finances like the previous government did.”
Economic uncertainty has seen the cost of government borrowing rise across the world, with a report published by the Organisation for Economic Cooperation and Development last week showing its members were now spending more on debt interest than defence.
In the UK, the yield on 10-year gilts – effectively the cost of government borrowing – has risen from 4% a year ago to 4.7%, with some blaming domestic factors as well as the global trend.
In October, the OBR had already forecast that the Government would spend £105 billion on debt interest payments, equivalent to around 8% of total spending, and recent rises in the cost of borrowing is likely to see that increase.
Economists have suggested that this, combined with the UK’s stuttering growth, will mean the £9.9 billion of headroom Ms Reeves had against her fiscal rules in October would be eliminated, requiring Wednesday’s statement to deliver either spending cuts, tax rises, or the abandonment of those rules.
